Despite tough times, parents spend big on kids

From tooth-fairy payouts to toys, some parents resist recession-era cutbacks

By

RuthMantell

WASHINGTON (MarketWatch) -- Jason Alderman's kids get $2 for the first tooth they lose and $1 for each subsequent tooth -- a golden Sacagawea coin to make the event special.

"A lot of my neighbors give $5 a tooth," said Alderman, senior director of financial education at Visa. "I've been lucky our kids haven't complained about the disparity from house to house."

Indeed, the tooth market can be pricey for parents. The tooth fairy leaves an average of $3 per tooth for kids under 10, according to a recently released survey of more than 200 adults from Visa Inc., the payment technology company.

Kids also are making out pretty well when it comes to toys. Last year about $41.2 billion was spent on traditional toys and video games, compared with $43 billion in 2008, according to market research firm NPD Group.

Despite the tough economy and strained family budgets, parents are still shelling out for teeth, toys and other discretionary kids' items. What's going on?

"We are not always rational about these things with our kids," said David Palmiter, a clinical psychologist in Clarks Summit, Pa., who focuses on children and families.

"When we are thinking about where to cut back, our thoughts don't go as quickly to those ritualized experiences with kids that give us collective joy," he said.

Paul Donahue, a Scarsdale, N.Y.-based clinical psychologist and author of "Parenting Without Fear," said parents are reluctant to cut back when it comes to special events.

"With things like birthdays, Christmas, the tooth fairy, people regard those to some extent as sacred," Donahue said.

Even parents grappling with a tight budget would rather cut spending on themselves than their kids, said Kathleen Gurney, a psychologist and chief executive of Financial Psychology Corp., a Sarasota, Fla., advisory firm.

"People are so resistant to make changes because of feelings of guilt, feelings of shame, sadness," Gurney said.

How much to give?

Back when I was losing baby teeth (I'm 32 now and thankfully have a full set of adult chompers), my folks left a Kennedy half dollar under my pillow at night, or if I was sleeping restlessly, under my juice glass in the morning.

"It was an unusual coin, it was a special kind of thing," Nancy Mantell told me. "It seemed like a reasonable amount." When asked why I didn't receive, say, a dollar per tooth, my mother said: "It was a tooth, for heaven's sake."

According to an inflation calculator on the Bureau of Labor Statistics website, the 50 cents I received for a tooth in 1983 would have the same buying power as $1.09 now. See the inflation calculator.

My eight-month-old daughter is years away from losing her first baby teeth. But if I adjust my own childhood payout for inflation in a few years, it looks like she'll be seriously underfunded compared with other kids.

What to do?

Visa's Alderman said parents should consider their household values when figuring what to spend on teeth and other items. "It's the same question a lot of parents deal with on the allowance side," he said.

"You don't want to have the kid that gets the smallest allowance or the biggest allowance. You don't want to be ungenerous, but you also don't want to be over the top," he said.

Parents can feel pressure to keep up with their neighbors.

"It's a difficult question. It takes courage for parents to decide on their own what they think is appropriate, not to do comparison shopping," Donahue said. "It's important to feel like they can have their own traditions."

Palmiter said parents may overestimate how much kids need parents to spend money on them.

"What the child really wants from you is not the dopamine rush from opening presents. It's more the attention and relationship with the parent, to simply give undivided attention," Palmiter said.

Donahue said some parents will be generous with children when it comes to their allowance or special events like a lost tooth, but they will also expect the kids to be responsible for buying things for themselves.

Teachable moments

Tough times provide great teachable moments, and parents can cut down on spending for events such as lost teeth and the holidays, Gurney said.

"You could say, 'The Easter bunny is having a tough time like everybody else,'" Gurney said.

It's not unreasonable to tell children that the family is in a different position this year, and not spending as much, Donahue said.

"We don't want the kids to worry too much. But for kids to learn that there are times that they have to delay their own gratification, that they don't get everything they want, that's not a bad message to send to kids," Donahue said. "There are times when it's appropriate to be more parsimonious."

Parents can make the mistake of over-sheltering kids. Visits from the tooth fairy or Santa Claus, or giving a regular allowance can be a good time to talk to kids about tough financial realities.

"We want to reassure them that things will be fine. But at the same time they can be disconnected from larger realities," Alderman said. "If your family needs to tighten their belt all the way around, they need to understand that."

Providing a regular allowance can also help parents teach kids about money, Palmiter said. "When kids start having money of their own there are other developmental tasks they can start to master: budgeting, giving to charity, banking skills," Palmiter said.

"Kids can start making some of their own decisions about resource allocation when they are still young. So many kids get to universities across the country and they have no experience with these things. They are not used to managing their own money."

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